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Letting Agent Ban - Latest Update

 

In November 2016 the Chancellor of the Exchequer announced that the Government intended to ban letting agents’ fees to tenants in England. So, over 18 months later, what is the progress of the ban and when can we expect it to be implemented?

 

Timeline


·     23 November 2016- Philip Hammond announces plans to ban letting agent fees.

·      7 April 2017 to 2 June 2017- the Government launched an eight week consultation, seeking views on the details of how a ban should be introduced.

·     1 November 2017- a draft Tenant Fees Bill was introduced to Parliament.

·      29 March 2018- the Housing, Communities and Local Government Select Committee published their final report regarding their pre-legislative scrutiny of the draft Bill.

·       2 May 2018- the Tenant Fees Bill was introduced into Parliament. The Government also published its response to the Select Committee report.


What is the Tenant Fees Bill?


The Bill sets out the government’s approach to banning letting fees for tenants. In short, any fee that is not permitted under the Act will be banned. The most significant points to note are as follows:-

 

o     Holding deposits will be capped at no more than one week’s rent.

o     Security deposits will be capped at no more than six week’s rent.

o    The ban will be enforced by Trading Standards. A fine of £5,000 can be imposed for an initial offence; however the financial penalty can be up to as much as £30,000.

o    Holding deposits must be returned within 7 days, subject to exceptions such as if the tenant provides false or misleading information.  

o     The Act is not retrospective, meaning older tenancies will not be affected.


When will it be implemented?

 

The bill has had its second reading in Parliament and will be considered next at what is known as the ‘Report Stage’, on a date to be announced. At the Report Stage, further amendments to the bill can be proposed. The Government anticipates the ban to come into force in 2019.


What does it mean?

 

Fees for matters such as referencing, inventories and administration will all be caught under the Act. Clearly, this stands to have a significant impact on managing agents. Total turnover in the residential lettings sector is around £4 billion and the industry employs around 58,000 workers. Capital Economics has predicted that agents are likely to lose £0.2 billion in turnover and around 4,000 jobs will be cut.

 

Despite the ban, it is not certain that tenants will actually benefit. Landlords are likely to pass on the agents’ fees to the tenants anyway, by way of higher rent.

 

It is estimated that tenants who move frequently will benefit from the ban, but those who do so less frequently will actually suffer a loss.

 

Until the bill comes into force, it is not possible to accurately predict how the act will affect landlords, agents or tenants. However, managing agents are in the meantime, being encouraged to reconsider their business models.



Catherine Burgess is a Solicitor at JPC Law.

For more information and advice, please contact her.

E: cburgess@jpclaw.co.uk

T: 020 7644 7283

General Enquiries

E: enquiries@jpclaw.co.uk

T: 020 7625 4424

 

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